Oil falls as signs of
U.S. output rise overshadow OPEC-led cuts
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[January 23, 2017]
By Karolin Schaps
(Reuters) - Oil prices fell one percent on Monday as signs of a strong
recovery in U.S. oil drilling activity outweighed news that OPEC and
non-OPEC producers were on track to meet output reduction goals set in
Global benchmark Brent crude prices were down 49 cents at $55 a
barrel at 1221 GMT, while U.S. West Texas Intermediate (WTI) crude
futures traded at $52.57 a barrel, down 65 cents, or 1.2 percent, on
Ministers representing members of the Organization of the Petroleum
Exporting Countries and non-OPEC producers said at a meeting in Vienna
on Sunday that of almost 1.8 million barrels per day (bpd) they had
agreed to be taken out of the market, 1.5 million bpd had already gone.
"A lot of this is already priced in and the U.S. rig count keeps rising
and gathering pace," said Carsten Fritsch, commodities analyst at
Commerzbank in Frankfurt.
U.S. drillers added most rigs in nearly four years last week, data from
energy services firm Baker Hughes showed on Friday.
This extends an eight-month drilling recovery and is supporting signs
that U.S. production will continue to rise strongly just as other
producers are cutting output.
"Baker Hughes said that 35 new rigs were activated last week, fuelling
fears of a significant rise in U.S. production which would offset the
reduction by OPEC – and making a mockery of the Saudis' claim that they
had managed to break the U.S. shale drillers," said Ashley Kelty,
research analyst at Cenkos Securities.
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A pump jack stands idle in Dewitt County, Texas January 13, 2016.
oil production has risen more than 6 percent since mid-2016, although it remains
7 percent below a historic high in 2015. It is back to levels of late 2014, when
strong U.S. crude output contributed to a crash in oil prices.
Oil market speculators added to bullish bets last week, however, showing they
were more optimistic about higher prices.
They raised long positions on Brent crude futures by 13,931 contracts, weekly
data provided by Intercontinental Exchange showed on Monday.
Equatorial Guinea, a signatory of the production cut deal, said on Monday it had
made an application to join OPEC as its 14th member.
The offer was made when Mines and Hydrocarbons Minister Gabriel Mbaga Obiang
traveled to Vienna on Friday but his statement provided no further details about
the west African nation's bid for OPEC membership.
(Additional reporting by Naveen Thukral and Henning Gloystein in Singapore;
Editing by Alexander Smith and David Evans)
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